As U.S. Debt Surpasses GDP, These 2 ETFs Are Emerging Winners in the “Sell America” Trade

Summary

America has a massive debt problem, and it isn’t record-high auto loans and credit card delinquencies that are fueling the crisis. As of March 31, U.S. federal debt held by the public exceeded 100% of the country’s gross domestic product (GDP) for the first sustained period since 1946. According to the U.S. Debt Clock, the national debt has now topped $39 trillion, and the interest on that debt exceeds $1 trillion. Meanwhile, Federal Reserve data indicates that in Q1 2026, U.S. GDP was nearly $32 trillion. As sovereign risk increases, conservative-minded investors can turn to two exchange-traded funds (ETFs), both of which serve as a hedge against the possibility that the federal government will default on its debt obligations. How U.S. Federal Debt Got So BadSave for a very brief period during the pandemic when GDP plummeted, the last time the United States found itself in this situation was in the wake of World War II. But unlike post-war America, the drivers and implications today are far different. According to the Peter G. Peterson Foundation, a nonpartisan, nonprofit organization that aims to build support for solutions to put America on a sustainable fiscal path, today’s federal debt crisis is being driven by a combination of factors. A series of tax cuts (and subsequently lower tax revenue), increased government spending, interest payments, and the costs associated with America’s aging population have fueled a rise in both Social Security and Medicare outlays. The Congressional Budget Office (CBO) anticipates that federal spending will rise from 23.3% of GDP in 2026 to 27.9% in 2056. The CBO has also found that while tax revenue will also increase during that forecast period, it will do so more slowly, climbing from 17.5% of GDP in 2026 to 18.8% in 2056. While the United States has yet to default on its debt, government shutdowns spurred by deficit spending debates have contributed to the country’s credit rating being downgraded three times. Most recently, M...